- Moving the markets
The market was a roller coaster today, but the major indexes still managed to end the month on a high note, even though the Fed has not ruled out further rate hikes.
The S&P 500 gained 2.9% and posted its fifth consecutive positive month for the first time since August 2021. Investors seem to be optimistic about a smooth economic recovery, as recent data shows strong job growth and easing inflation. The second-quarter earnings also beat the low expectations.
However, this rally was driven by only 7 of the S&P 500 stocks, so the rest of the market was not as lucky. That’s why traders are eagerly waiting for Amazon and Apple to report their earnings on Thursday, which could make or break the market mood.
Last week, the Fed increased rates by a quarter-point, to the highest level in more than 22 years. Fed Chair Jerome Powell said the Fed will act based on data, not predictions, but he also hinted that rate cuts are not likely anytime soon.
The US Economic Surprise Index rose for the third month in a row and reached its highest level since March 2021. So much for the landing scenarios. Maybe we are flying high…
Of course, part of the reason for the July surge were some massive short-squeezes, which sparked the biggest 3-month rally since March 2021.
Bond yields were mixed, with the 10-year failing to break above 4% twice. The dollar dropped for the second month in a row but bounced back from its mid-month low.
But one thing that could spoil the inflation party was Crude Oil, which had its best month since January 2022, as it almost hit $82. This could push up the CPI numbers in the future.
Gold also shone brightly, with its best month since March and a 3% gain. It also reclaimed the $2k level again.
Despite the bullish mood on Wall Street, the S&P 500 is way out of sync with high yield bonds, which makes me wonder when this gap will close.
- “Buy” Cycle Suggestions
The current Buy cycle began on 12/1/2022, and I gave you some ETF tips based on my StatSheet back then. But if you joined me later, you might want to check out the latest StatSheet, which I update and post every Thursday at 6:30 pm PST.
You should also think about how much risk you can handle when picking your ETFs. If you are more cautious, you might want to go for the ones in the middle of the M-Index rankings. And if you don’t want to go all in, you can start with a 33% exposure and see how it goes.
We are in a crazy time, with the economy going downhill and some earnings taking a hit. That will eventually drag down stock prices too. So, in my advisor’s practice, we are looking for some value, growth and dividend ETFs that can weather the storm. And of course, gold is always a good friend.
Whatever you invest in, don’t forget to use a trailing sell stop of 8-12% to protect yourself from big losses.
- Trend Tracking Indexes (TTIs)
The major indexes moved up and down around the break-even point until a sudden surge of buying in the last 15 minutes lifted them into positive territory.
Our TTIs followed the same pattern and are now firmly in the bullish zone.
This is how we closed 07/31/2023:
Domestic TTI: +6.97% above its M/A (prior close +6.64%)—Buy signal effective 12/1/2022.
International TTI: +9.01% above its M/A (prior close +8.71%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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